by Al MartinPaul Craig Roberts: There He Goes Again
(11-20-14) As Ronald Reagan famously said during his debate with Jimmy Carter, “there you go again.” The same could be said about Paul Craig Roberts, another discredited so-called Reagan-Bush era supply-sider which would also include David Stockman, Larry Kudlow and Arthur Laffer, inventor of the so-called Laffer Curve.
“Supply side economics,” is defined by Investopedia as “an economic theory holding that bolstering an economy's ability to supply more goods is the most effective way to stimulate economic growth.”
In his column called “A Global House of Cards,” Paul Craig Roberts writes, “As most Americans, if not the financial media, are aware, Quantitative Easing (a euphemism for printing money) has failed to bring back the US economy.” He’s certainly right about that.
However he leaves out an important point -- without QE, the United States and the rest of the industrialized countries would have collapsed.
In other words, the term “House of Cards” is correct, but guys like Kudlow and Roberts and all the old economic supply-siders who pooh-pooh Quantitative Easing and say that it does not produce the economic growth it promised are correct in saying that, but what they leave out of the equation – because they’re so anti-QE to begin with – but the fact that it did not bring back the economic growth as promised tells you how deteriorated the global fiscalsituation really is. The fact remains that Quantitative Easing was only able to stabilize the global deteriorating fiscal situation.
“So why has Japan adopted the policy?” he writes. “Since the heavy duty money printing began in 2013, the Japanese yen has fallen 35% against the US dollar, a big cost for a country dependent on energy imports. Moreover, the Japanese economy has shown no growth in response to the QE stimulus to justify the rising price of imports.”
Once again that’s only one side of the equation. The reason the Japanese keep the Good Ship QE Tokyo at sea forever is an effort to cheapen the Yen because their economy is heavily reliant on manufactured export products – even more so than Germany – that they have to cheapen the Yen in order for their domestic industries to make money and to make their exports competitive. The other side of that – what he’s talking about – is that it does increase Japanese import prices of everything, particularly energy.
The Japanese are doing this deliberately. They just put a minus number in front of their benchmark interest rates in order to depreciate the value of the Yen to increase the attractiveness of their exports and to increase the razor-thin profit margins that Japanese corporations have.
Roberts then writes – “… What does Japan have to gain from currency depreciation? What is the thinking behind the policy? An easy explanation is that Japan is being ordered to destroy its currency in order to protect the over-printed US dollar. As a vassal state, Japan suffers under US political and financial hegemony and is powerless to resist Washington’s pressure.”
That hasn’t been true since the 1960s, and the reason why that has changed and the Nixon Regime encouraged Japan to initially depreciate the Yen was that so they wouldn’t continue to be a “vassal state” costing the American taxpayer money – even 20 years after the war.
Roberts continues – “The official explanation is that, like the Federal Reserve, the Bank of Japan professes to believe in the Phillips Curve, which associates economic growth with inflation. The supply-side economic policy implemented by the Reagan administration disproved the Phillips Curve belief that economic growth was inconsistent with a declining or a stable rate of inflation. However, establishment economists refuse to take note and continue with the dogmas with which they are comfortable.”
This is another self-serving comment because the so-called supply-side economics or Reaganomics which is what he’s talking about was a policy purposely undertaken -- not by Reagan because he didn’t even know what time of day it was – by George Bush & Company in order to coordinate and create and solidify the so-called Trickle Up economic mechanism, where money would flow continuously upwards into the hands of the Wealthy Bushonian Republicans from the Working Class Republicans.
It should be remembered how this got billed in the 1980s as so-called Supply-Side Trickle Down Theory and they got away with it because they knew the statistics that 82% of Americans know nothing about economics or markets. The concept of “Trickle Down” was understood by only 6% who knew what it meant – that wealth was going to flow down from the top 18% into the hands of the bottom 82% -- but it was wrong. The Great Unwashed didn’t know the difference as in “they didn’t know it was not bacon.”
In other news, one of the architects of ObamaCare called Jonathan Gruber, an MIT professor, admitted that if he hadn’t lied about ObamaCare it would have never been passed. Then to add fuel to the fire, he said the American people were too stupid to know the difference. He said -- “Lack of transparency is a huge political advantage. Basically, call it the stupidity of the American voter or whatever, but basically that was really, really critical to getting the thing to pass.”
The problem I have with ObamaCare personally is that it’s just another wealth transfer mechanism from the young to the old. It is forcing the healthy young 25-year-olds to pay as much as 5 times what they had paid before for Blue Cross or Blue Shield that they had been paying before – essentially for the same coverage in order to provide a subsidy for the 65-year-olds who didn’t work and didn’t save money throughout their lifetimes and now need subsidized health care.
Also the penalties work both ways. Not only does ObamaCare come with a fixed annual penalty which increases over time if you do not enroll in ObamaCare, but that penalty to we half-dead old shufflers, wherein we the half-dead old shufflers are being forced to take a subsidy whether we want to or not.
Roberts continues – “The extent of financial corruption involving collusion between the mega-banks and the financial authorities is unfathomable. The Western financial system is a house of cards resting on corruption.”
The problem is that the “house of cards” was built by people who have the last name of “Bush.” It wasn’t built by Obama. The Obama Regime just like the Clinton Regime inherited yet another Bushonian mess.
“The house of cards has stood longer than I thought possible,” he continues. “Can it stand forever or are there so many rotted joints that some simultaneous collection of failures overwhelms the manipulation and brings on a massive crash? Time will tell.”
How it all gets unraveled is going to be some anomalous event that initially isn’t looked at very carefully because it’s not considered that severe which then creates a cascading effect against the banks, brokerage houses, insurance firms, etc. similar to what happened in the 1988-1992 time frame when that cascading effect of Bushonomics created a dangerous fragile planet fiscally speaking. This is the so-called Black Swan Scenario.
What Roberts is conveniently forgetting to mention is that it was Bushonomics which created the possibility of a Black Swan Scenario.
Roberts is correct in saying that the planet’s economy has become a house of cards. That part -- he’s right about. But Roberts isn’t mentioning the fact that when the Reagan-Bush Regime came to power on January 21, 1981, the cumulative national debt that included both federal and state was $1.5 trillion.
By the time said Bushonian Regime left office on January 21, 1993, the cumulative or aggregate national debt of the federal government and the states exceeded $14 trillion. Therein lies the problem. That is the essence of the problem -- the Clinton Regime could not remain in power long enough to fix it, to generate enough fiscal surpluses and then that got followed by yet another Bushonian Regime which immediately depleted the fiscal surpluses it inherited and then proceeded to create another $3 trillion in debt.
The problem then became that the Obama Regime, a young naïve progressive liberal Democratic regime which surrounded itself with young progressive ideologues who knew very little about economics including Treasury Secretary Timothy Geithner who were all left-wing academic social welfareist bureaucrat types with no practical experience in the world of business and industry. They all thought they would be able to get some sort of new progressive JFK Great Society agenda – when that wasn’t possible.
When Obama personally spoke to Bill Clinton and Clinton told him what he had to do, that – you like I inherited a Bushonian Mess and you are now going to have to act with exceptional fiscal discipline in order to create budget surpluses necessary to pay down some of the Bushonian –created debt that you have inherited.
The problem was that Obama himself and the people he surrounded himself with didn’t understand that. Consequently they have made matters worse by not realizing what their position in history was – to create budget surpluses like Clinton and then to use those surpluses to pay down Bushonian debt and to create a coordinated fiscal and monetary stimulus program which they could not create because A) they didn’t understand it and B) the Republicans in Congress knew they had the ability to block anything that made fiscal sense.
So the Obama Regime has simply drifted and made matters worse by not doing what they needed to do from the onset thus leaving the nation and by extension the planet – since as the United States goes so goes the planet – more fiscally vulnerable to collapse.
Stay tuned…

* AL MARTIN is an independent economic-political analyst with 25 years of experience as a trader on NYMEX, CME, CBOT and CFTC. As a former contributor to the Presidential Council of Economic Advisors, Al Martin is considered to be a source of independent analysis for financially sophisticated and market savvy investors.

After working as a broker on Wall Street, Al Martin was involved in the so-called "Iran Contra" Affair as a fundraiser for the Bush Cabal from the covert side of government aka the US Shadow Government.

His memoir, "The Conspirators: Secrets of an Iran Contra Insider," (http://www.almartinraw.com) provides an unprecedented look at the frauds of the Bush Cabal during the Iran Contra era. His weekly column, "Behind the Scenes in the Beltway," is published weekly on Al Martin Raw.com, which also publishes a bimonthly newsletter called "Whistleblower Gazette."

Al Martin's new website "Insider Intelligence" (http://www.insiderintelligence.com) will provide a long term macro-view of world markets and how they are affected by backroom realpolitik.